Tuesday, June 23, 2015

Check out this great interview by This Week In Start Ups as founder and
host Jason Calacanis talks to former WIRED Editor-in-Chief and 3D Robotics Founder
and CEO Chris Anderson about his company, drones, and much more.

So Apple, the big Cupertino based leviathan that permeates modern culture
almost as much as it does the consumer electronics market is brought to its knees
by Taylor Swift is the prevailing narrative you’ll read just about everywhere
on the internet but, as in most cases, the truth is much more complex and
interesting than meets the eye.

While Taylor Swift’s public objection to Apple’s plan to not pay royalties
to artists for three months was the straw that rather large and intimidating camel’s
back, it was the public outcry small indie and labels artists registering that
brought it to a fever pitch where Apple would have no choice but to address the
shortcomings of a plan that might have put some indie labels out of business.

While it’s quite a feat that one of the most powerful companies on the
planet backpedaled so quickly and publicly on its plan because of a Tumblr blog
from a prominent artist, the sad truth is that Apple can afford can back down
from challenges from artists and indie labels as, for them, the stakes are not
high enough given the sobering fact that the company comfortably makes in a
quarter what the music industry makes in a year.

This large disparity between the scale of Apple and entire music industry
gives a certain whiff about Apple Music’s launch that suggests that Apple’s
only taking on the music industry just to see if they can be as dominant as they
was with iTunes back in the early 2000’s and, given Apple’s ridiculous cash and
talent advantage over just about every player in the music streaming market,
only a fool or a clairvoyant would bet against them.

The only real reason Apple were able to make music executives kill the
album and give birth to the singles driven music market we have today back in
2003 and are very likely to dictate terms to industry once again is that the
music industry has never truly been able to control or own the means of how
music was distributed or disseminated which has left the industry ripe for
disruption since Thomas Edison invented the phonograph in 1877. The problem of
how music was distributed and/or disseminated became more pronounced in the
download era and now with streaming which has made this long term industry
problem even harder to ignore. Say what you want about Tidal but the artist
owned streaming service represents the best step the music industry has taken
to control how music is distributed or disseminated for decades which,
unfortunately for the music industry, too little, too late.

Because of this lack of control over how music distributed or disseminated,
music fans, writers, artists, insiders and executives have had to dine on
steady diet of books and articles that wonder out loud as to what new company, app,
software, device and/or visionary will save the music industry or gives us
culprits to vilify (usually major labels or naïve ambitious tech
companies like Spotify who make the mistake of thinking they can save an entire
industry) every time the industry contracts in record sales but not in the
demand for great music.

With every generation this long term industry problem gets worse and doesn’t
look like it’s going to get better and as long as it persists, innovative last
mover companies like Apple with the deep pockets and talent to capture markets
will always be able to control how we get to listen the music we love.

The real losers in this equation is almost always going to be artists who
find themselves getting screwed by their labels who license their music to
Apple for large fees and are nickeled and dimed by streaming companies who, in
most cases, are forced to do so because of the large licensing fees they have
cough up to labels to host their music.

In sum, while Taylor Swift, indie labels and other indie artists can take
heart that Apple backed down under pressure but, in the end, Apple can bow down
to every artist in the Billboard top 100 and still come up trumps because they
have the ultimate ace in the hole: the music industry short termism which has
given innovative companies from Edison Speaking Phonograph Company onwards a chance
to dominate an industry that can’t see the blood on the leaves and realize that
it’s theirs.

Check out this great interview by Stanford Business School with former New
York Times Executive Editor Jill Abramson as she talks about her experiences at
the newspaper and gives her take on the future of journalism

Everybody knew at some point
Apple would get into music streaming business when they bought beats music last
year thanks to the decline of the download market and the rise in use of music
streaming services such as Spotify and Pandora and with the release of Apple
Music at the end of this month, Apple is in a great position to quickly gain a
dominant market position.

While there are some
unattractive elements of Apple's music streaming offering such as its social
media offering for artists to connect with fans (need we run through the gamut
of alternatives where artists can and already do this?), Apple can fix these
kinks quite quickly thanks to the cash and talent advantage it has over just
about every player in the music streaming landscape.

While the current players in
the music streaming market have reacted rather positively to Apple getting into
music streaming, you can't shake the nagging feeling that music streaming
executives across the board are racking their as to how they’re going to tackle
a company that has the money, prestige, talent and intent to dominate their
music streaming in a relatively short space of time

Rivals like Spotify has a big head start
with its 60 million subscribers (15 million of them paying subscribers) and,
unlike Apple's new offering, has an ad supported free tier which gives them the
chance to convert free users into paying ones. However, given the cash and
talent advantage Apple has over all its music streaming competitors it can
quickly make up for lost time as while Spotify can raise a lot of money to help
generate growth or at least combat its current inability to make money, Apple
can eat initial losses accrued from its new music service longer than Spotify
can. Apple can do this because they have cash to burn and, crucially, music
streaming isn't their core business so the stakes aren't as high for Apple as
they are for Spotify.

Apple also, worryingly for
competitors, have the ability to be the last mover in the music streaming
market much like Amazon was for online book selling and Google was for search
engines. This is more than likely to happen as Apple's cash advantage means
that they can offer larger royalties for artists and a much larger licensing
checks for record labels who own their artist's music.

However, the biggest
advantage Apple has out the gate is its ridiculously large customer base which
could make Apple the kings of music streaming in one fell swoop as Pandoras'
David Holmes pointed out "Apple alone already has 800 million credit cards
on file. And if it convinces just 4 percent of these cardholders to pay $9.99 a
month, the company would singlehandedly double the total amount of streaming
revenue made in the US last year"

All this might not frighten
music executives as so far they have negotiated the music streaming market an
awful lot better than they did the download market when then Apple CEO Steve
Jobs virtually browbeat the entire industry into killing the album and
fostering the single driven digital music market that's still prevalent today.

As content owners, Labels
this time round are in a better position than they were in back in the early
2000's when the industry as a whole was pretty much clueless as to how to deal
with online piracy and, to some degree, still are. The rise of music streaming
services has given record labels serious leverage over how music is distributed
as streaming services weakened the need for consumers to download music
illegally as they, much like iTunes did a decade ago, provided a much better
experience than the "illegal" alternative.

Labels have ruthlessly
used this leverage to, for the lack of a better word, extort money out of music
streaming services (particularly Spotify) to the point that their music
licensing costs outstrip their other costs combined. Their leverage is also why
most music streaming services don't make money despite reporting double digital
revenue growth group year on year and Spotify, who pay more than most, gets
their name dragged through the mud in the press with stories about low artist
payouts.

Labels even used their
advantage against Apple as they're the reason why Apple Music is priced at
$9.99 a month instead of the $5.00 a month Apple planned to enter the market
with and made negotiations run as close as they could to Apple's big
announcement. However, labels may come to rue how they have used their leverage
as content owners as explained earlier, Apple can quickly become their biggest
licencee of its content and maybe five years down the road, might be the only
game in town or at least the only game worth entertaining.

Tech companies are notorious
for aggressively negotiating prices with content owners and creators when they
have leverage over how content is distributed as Amazon's infamous clashes with
book publishers and Apple's famous negotiations in the early 2000's with music
executives have shown and should Apple dominate the music streaming market,
expect more of the same. Apple, surely none too pleased that their plans to
compete in the music streaming market were leaked twice leading up Tuesday'
release, would surely love to get payback after music executives were damn near dismissive about Apple Music and
patting themselves on the back for driving a hard bargain.

However, despite the efforts
of labels, the music industry looks like it's going to be one of the few
industries in the world to disrupted twice by same company as Apple are
determined regain their position as the kings of the digital music market once
again and with their vast resources, you can only pity the fool stupid enough
to bet against them.

Friday, June 5, 2015

If the true measure of a company is how it treats its workers then the UFC
is seriously lacking as the MMA organization fails to address its chronic
problem of making major decisions with, it seems, very little input or notification
of the 600 plus fighters under its banner

The UFC is great at a number of things including marketing itself better
than about every combat sport or organization and actually being able put on
fights people want to see but the announcement of the sponsorship deal with
Reebok and the recently announced introduction of a drug testing program has
shown that the interest of fighters aren't considered.

The UFC's six year apparel deal with Reebok that will see UFC fighters
wearing Reebok apparel during fight week. Fighters will be paid according to
five tiered system based on fights fought with the organization which may
benefit seasoned UFC campaigners such as Joe Lauzon, former WEC champ Urijah
Faber and Donald Cerrone (all of whom could probably earn much more in
sponsorship but it may screw 90% percent of the MMA organization's female
roster and as well as new up and coming talent who are likely to populate the
lower tiers.

Even those who may stand to benefit most from the deal have reservations as
while they might be in the higher tiers and therefore earn more sponsorship
money, many of them could earn more through securing their own sponsors than
they would get when the Reebok deal takes effect next month.

Fighters are already losing money with sponsors ending deals with fighters
because the Reebook deal ensures fighters can't promote other brands on their
training or fight apparel. This means that regardless of where a fighter ends
up in the five tier payment system, they lose money before and after the deal
takes effect.

This has led to a public outbursts from a number of UFC stars who have
revealed the earnings they'll lose out on because of the Reebok deal.
Heavyweight Matt Mitirone, a 13 fight UFC veteran took to twitter to register
his disdain for the Reebok deal quipping that the sports and fitness apparel
brand secured a great bargain according to him "at the cost of the
fighters".

In his interview with MMA Fighting, UFC fighter James Krause revealed that
he lost $20,000 in canceled sponsorship deals and with the loss of income could
find himself struggling to meet his commitments as he points to the fact that
the fighters life is riddled with insecurity as every fight you have could be
your last no matter how good you are. The insecurity is made worse as the UFC
is not shy to cut a fighter from their roster that, in the words of UFC
president Dana White, fails to "move the needle" even when they're a
top ten contender as former UFC fighter Jon Fitch found out to his chagrin.

The UFC can cut a fighter as and when they please as technically, fighters
under the UFC Banner aren't employed by the UFC as they're recognized as
"independent contractors" which means they have little to none of the
rights an employee would have. This also means that fighter contracts are
ridiculously one sided in the favor of the UFC and gives the organization the
power to literally make or break a fighter's career because of it. Under these
conditions, can you blame the onslaught of fighters who are not sold on the
Reebok deal? Krause, like you would expect from a UFC fighter, describes the
situation pretty bluntly as he points out that "In the UFC, our contracts
don't mean sh*t. For us, anyway. For them, they do. There's no security behind
it"

The insecurity of the fighter's life in the UFC is why there has been talk
about fighters banding together to setup a union but with none of the top stars
(maybe with the exception of UFC champion Joe Aldo) or even a good deal of the
mid carders in the mood to unionize, fighters collectively bargaining with the
UFC over pay is a distant reality to say the least.

This is a shame as if fighters under the UFC banner unionized, it would
instantly remedy the UFC's chronic problem of announcing initiatives, deals and
policies with little to no consultation with the fighters, especially when it
affects them directly. It's a smart bet that there wouldn't be this much public
uproar on the part of the fighters if the UFC sat the fighters down and talked
them through deal but, time and again, the UFC has pretty much streamlined
changes that affected fighters with little to no opposition as fighters have no
leverage or even representation to make demands.

However, if fighters did set up a union to represent their interests, the
UFC would have no choice but to listen to the demands and concerns of fighters
as the UFC's worst nightmare are their fighters going on strike given its
relentless fight schedule, sponsorship deals and TV commitments. A union would
ensure that fighters have a seat at the table when moves are made that affect
them but as things stand, the UFC will continue to have its way.

How the UFC runs its business is not necessarily wrong as they can run
their business however they please under the purview of the law but with the
Reebok deal set to take effect next month, the UFC may just find itself in a
real pickle as the MMA organization could miss out on new talent as fighters
realize that the UFC's Reebok deal will drastically effect their earning power
when it comes to securing sponsorships and even cause them to lose money if
they had fight apparel deals of their own.

While the UFC has the best talent and is so dominant in the MMA promotion
business that the sport itself and the UFC brand is damn near synonymous,
fighters in MMA and other combat sports are all too aware of the short space of
time they have to capitalize on their talents and how one false move could end
their career which means fighters will have to make a choice between joining
other MMA organizations such as Bellator and the World Series of Fighting who
have no apparel deals or join the UFC and lose out financially even if they
succeed against the best talent the UFC has to offer.

In sum, The UFC is truly playing with fire forcing fighters to make this
decision knowing full well sponsors is how fighters really make money and in
some cases can triple their fight purse just from sponsorship income per fight.
With the Reebok deal set to run for at least six years, the UFC could be
brought to its knees in this time as competitors could be the real
beneficiaries as far as we can see, the fighters hate the deal, new prospects
will hate his deal and/or may avoid joining the UFC because of it, and, if
they're not careful, the UFC will hate this deal when fans divert to other MMA
organizations who will attract more sponsors and better talent than the UFC
over time because of one deal they might live to regret.

Wednesday, June 3, 2015

While Blatter suddenly resigning and ending his 17 year reign at FIFA
shocked football, no one was in need of a Kleenex for sorrowful tears as the
swiss mountain goat (as Blatter strangely compared himself to in an interview
in New Zealand) has run his course.

After handily winning an election everybody knew he was going win and his
tone deaf victory speech, you would have thought the mountain goat was really
going to stick around for four years despite a growing number of current and
former members of FIFA’s executive committee are under investigation for
bribery in relation to FIFA’s bidding process.

However, knowing that he is easily the most unpopular man in the sport he
runs, Blatter, for once, did the right thing and step down for the good of the
game. But in truth, we won’t really know why he stepped down but various
reports suggest that Blatter has been implicated in a $10m payment to the South
African FA currently being investigated by the FBI that ended up in an account,
according to the Telegraph, “controlled by the disgraced former vice president
Jack Warner”[1].

While we’re not entirely sure that Blatter is implicated in any of the scandals
or is being investigated by the FBI or Swiss authorities, the abrupt nature of
his departure suggests that the walls were closing in fast on a man who has for
17 years appeared unflappable despite FIFA being known worldwide as the most
corrupt sporting organization on the planet

US authorities, like much of the footballing world, aren’t fans of now
former FIFA president and not so long ago issued thinly veiled threats that
they may arrest Blatter should he step foot on US soil. No one really knows or
cares what Blatter does as yesterday Blatter did the only thing fans and
insiders wanted from him – resign from the presidency and let somebody else in
to reform a truly rotten organization that’s been corrupt for decades.

With the departure of Blatter, the only question that seems to matter is who’s
going to take over FIFA and are they capable of reforming the organization. Former
Blatter presidential rival Prince Ali bin Hussein looks to be the main frontrunner
at the moment as he had strong support in Europe and with Blatter gone, his
voting bloc in Asia and Africa is now up for grabs. Prince Ali proved himself a
smart pragmatist as he tried to appease both sides of long established divide
between European countries in FIFA and just about everywhere else when he
promised to limit presidential terms to two terms and increase the places in
the World Cup from 32 to 36 which appeal to both factions.

He represents the safest vote as far as Blatter’s former Asian and African
voting bloc is concerned as he was the only presidential candidate who stayed
in the race until the end and was particular cautious about criticizing Blatter’s
reign despite the growing controversy surrounding the election.

However, with Blatter gone, there will be a number of suitors for the
presidency with former Manchester United Chief Executive David Gill rumored to
launch a bid and former presidential candidates Michael Van Praag and Luis Figo
sure to get back in the running. Current UEFA president Michel Platini has been
tipped to be FIFA president and was seen to be Blatter’s heir apparent until
they fell out with each other when Blatter promised to stand down after his
fourth term only to stand and win re-election a few months later.

In sum, whatever happens in the next few months, FIFA and whoever ends up
taking on the FIFA presidency has a real opportunity to change the organization
for the better as the mood for change among football fans and insiders is high
but given neither fans or insider can vote for FIFA president, the real
challenge is going be whether the new FIFA president can bring an organization
impervious to change. The answer we hope for is a resounding yes as the
integrity of the sport depends on it.

[1]
The Telegraph, 2015, Sepp Blatter stands down as FIFA president – the life,
times and controversies which damaged his career, http://www.telegraph.co.uk/sport/football/sepp-blatter/11647385/Sepp-Blatter-stands-down-as-Fifa-president-the-life-times-and-controversies-which-damaged-his-career.html